Grocer Sobeys Inc will acquire Canada Safeway Ltd for CAD 5.8-billion (USD 5.7 billion), which it believes will allow it to more smoothly penetrate the Western Canadian retail market, since the retailer has 213 stores across the country.

"After the acquisition, Sobeys will be a leading grocer in Western Canada and the largest grocer in Alberta, an attractive, high-growth market," said President and Chief Executive Paul Sobey. "This acquisition represents a unique and highly strategic opportunity for Sobeys to leverage its existing asset base, effectively creating a new platform for growth."

The acquisition will be completed through the wholly-owned Sobeys Inc subsidiary of Sobeys' parent company, Empire Company Limited. It will include 199 in-store pharmacies and 62 gas stations and Empire Co will also own 10 liquor stores, four distribution centres and 12 manufacturing facilities.

So far, it has not been decided whether the new network of stores will be branded under the Safeway or Sobeys banner or whether the two brands will be kept independent.

Empire said it expects for cost synergies to reach about CAD 200 million (USD 196.2 million) over three years by putting together the distribution, information technology and procurement divisions of both companies, The Canadian Press reports.

There has been no comment on whether layoffs are expected.

In addition to traditional domestic rivals like Loblaw, major US retail players like Walmart have been entering the Canadian market as well.

In its last financial year, Safeway had CAD 6.7 billion (USD 6.6 billion) in sales; it runs 1,400 stories in the US. The chain said its proceeds from the sale will be spent on paying down debt and buying back stock, as well as possibly investing in "growth opportunities."

About 60 per cent of Canada Safeway’s properties are located in Vancouver, Calgary, Edmonton and Winnipeg.

The deal has already been approved by the boards of directors of both companies and will be subject to approval by the Competition Bureau, CBC News reports.

Empire expects the transaction to be completed in the fourth-quarter of 2013 and immediately add to adjusted net earnings per share.

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